Tax Proposal Calculator

The Urban-Brookings Tax Policy Center has created a calculator to show how four proposals for radical income tax simplification – each of which would make the tax system more progressive than it is – would affect taxpayers. Users can input the common set of limited information needed to fill out tax forms under these reforms and the model will generate the expected tax liability under each reform. Users can then provide the additional information needed to compute taxes under the current system and the model will generate tax liability under the current system for comparison purposes.

To make the calculations feasible while minimizing users’ time, the calculator presents stylized versions of the four reforms and (especially) of the current income tax system. By contrast, commercial tax preparation software packages indicate the full amount of information that users need to provide to enable a precise calculation of tax liability.

For a detailed description of the methodology behind this calculator, see our methodology page.

TPC welcomes any feedback on the calculator, either on design or on how we modeled the provisions of the reforms or the current system. For such comments, please email [email protected].

For detailed information on how we use the entered data, please review our Privacy Policy.

Information needed under the four simplification proposals

Marital Status

Total Children

Number of child dependents under 24
For the principal taxpayer, all income from paid employment, including tips, bonuses, and the like.
Interest received on savings accounts and other financial investments, other than tax-exempt interest.
Interest on instruments such as municipal bonds that is exempt from the federal individual income tax.
Qualified dividends received. Enter nonqualified dividends as taxable interest income.
Gains on assets held for longer than one year. Enter short-term capital gains as taxable interest income.
Taxable portion of payments during retirement from plans (pension, 401(k), etc.) tied to previous employment.
All benefits for retirees, survivors, and dependents.
Interest paid on student loans.
Net income from a sole proprietorship, partnership, S corporation, limited liability company, or other business. All net income will be treated as earned by the primary taxpayer for purposes of calculating self-employment payroll taxes.
Income from all other taxable sources.
Enter amount saved (required for VAT liability calculation in model, not required on tax form)
The amount that was saved out of income rather than spent.

Are you finished entering all the information for the simplification proposals?

Enter values for deductions you wish to itemize; leave other values at zero.

Here is the additional information we need for current law:


Age

in College

Spouse’s age

Spouse in College

First child is

Second child is

Third child is

Fourth child is

Fifth child is

Sixth child is

Donations to charitable organizations or causes.
Qualifying medical expenses include out-of-pocket medical expenses on preventive care, treament, surgeries, and dental and vision care. Enter the total amount of expenses, not just the deductible portion.
Expenses for postsecondary education (e.g., tuition, textbooks, and school fees)
Mortgage interest paid on primary residence.
Income or sales tax payments (excluding property taxes) to state and local governments.
Real estate (property) tax payments to state and local governments.
Child care expenses for all children under age 13.
Professional services businesses (e.g., doctors, lawyers, accountants, etc.) are those in which the specified service limitation of the 20 percent qualified business income deduction applies for high-income taxpayers.

Tax Laws Compared

The calculator compares the tax liability for the chosen household/income combination under current law and four alternative tax simplification proposals described in detail below. The calculator accounts for the most widely used aspects of the tax code but does not include all provisions.

Current Law: Taxes owed under the current tax system (tax year 2023)

Simplified: Simplified Income Tax would considerably simplify the income tax for most people and maintain its graduated rate structure. The proposal would eliminate all itemized deductions, all personal credits, the section 199a deduction for business, the head of household filing status, and preferential rates for capital gains and dividends. It would create a personal credit of $1,000 for each family member and a work-related credit of 20% of individual earnings up to $20,000, phasing down to zero when individual earnings reach $40,000. Both credits would be refundable, meaning that taxpayers would receive the full credit even if their gross-of-credit tax liability was less than their eligible credits.

Modified Simplified: Exactly like the Simplified Income Tax with one change, designed to help low- and moderate-income families with children. The personal credit would be increased to $2,000 but would phase out beginning at $36,000 for unmarried filers and $72,000 for married filers.

Back to the Future: Back to the Future incorporates the simplifications in the first approach and raises the standard deduction substantially (to $100,000 for couples and $50,000 for singles from current levels of $27,700 and $13,850) the proposal would set the lowest income tax rate at 25% and create a 10% value-added tax (VAT). To help offset the burdens of the VAT on low- and moderate-income households, the refundable personal credit would rise to $2,800.

Simplified, VAT, UBI: Combines the simplification of the first proposal and the 25% minimum tax rate and 10% value-added tax of the third proposal to fund a substantial Universal Basic Income (UBI) program that would raise the personal credit to $3,900 per person.

Potential Tax Implications

Current Law
The above number is the estimated income tax liability under current law for a person or family that fits the marital status, income, and expenses that you selected. A negative number indicates that they will receive money from the government due to refundable tax credits.
Simplified
The above number is the estimated income tax liability under the Simplified Income Tax proposal.
The above number shows how your net tax liability would change from current law under the Simplified Income Tax proposal. A negative number indicates the person or family would be better off and a positive number indicates they would be worse off.
Modified Simplified
The above number is the estimated income tax liability under the Modified Simplified Income Tax proposal.
The above number shows how your net tax liability would change from current law under the Modified Simplified Income Tax proposal.
Back to the Future
The above number is the estimated combined income tax and VAT liability under the Back to the Future proposal.
The above number shows how your net tax liability would change from current law under the Back to the Future proposal.
Simplified, VAT, UBI
The above number is the estimated combined income tax and VAT liability under the Simplified Income Tax, VAT, UBI proposal.
The above number shows how your net tax liability would change from current law under the Simplified Income Tax, VAT, UBI proposal.
See Detailed Breakdown

Taxes

Current Law Simplified Modified Simplified Back to the Future Simplified, VAT, UBI
Adjusted gross income Total income subject to tax after adjustment for exclusions and additions. Current Law Simplified Modified Simplified Back to the Future Simplified, VAT, UBI
Standard Deduction A fixed-dollar reduction in taxable income for each tax return, for taxpayers who elect not to itemize specific deductions. Current Law Simplified Modified Simplified Back to the Future Simplified, VAT, UBI
Itemized Deductions Total expenses that taxpayers can itemize (net of limitations), including state and local taxes, mortgage interest, charitable contributions, and other items. Current Law Simplified Modified Simplified Back to the Future Simplified, VAT, UBI
Taxable Income Adjusted gross income minus personal exemptions, the standard or itemized deductions, and qualified business income deductions allowed under the regular income tax. Current Law Simplified Modified Simplified Back to the Future Simplified, VAT, UBI
Income tax before credits Current Law Simplified Modified Simplified Back to the Future Simplified, VAT, UBI
EITC/Work Credit Refundable tax credit based on taxpayer’s earnings and number of children; credit phases out for higher-income households. Current Law Simplified Modified Simplified Back to the Future Simplified, VAT, UBI
Child Credit/Personal Credit Credit based on number of dependents or total household size. Current Law Simplified Modified Simplified Back to the Future Simplified, VAT, UBI
Other Credits Including the child and dependent care credit, the American opportunity credit, and the lifetime learner credit. Current Law Simplified Modified Simplified Back to the Future Simplified, VAT, UBI
Income Tax After Credits Current Law Simplified Modified Simplified Back to the Future Simplified, VAT, UBI
VAT Estimated amount of Value Added Tax owed. Current Law Simplified Modified Simplified Back to the Future Simplified, VAT, UBI
Total Income Tax + VAT Current Law Simplified Modified Simplified Back to the Future Simplified, VAT, UBI

Acknowledgements

Project Acknowledgements

TPC is a joint venture of the Urban Institute and Brookings Institution. TPC is made up of nationally recognized experts in tax, budget, and social policy who have served at the highest levels of government. It aims to provide independent analyses of current and longer-term tax issues and to communicate its analyses to the public and to policymakers in a timely and accessible manner.

RESEARCH: David Weiner and Muskan Jha

DEVELOPMENT: Jessica Kelly, Jean Clayton Seraphin, and Silke Taylor